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Yaoundé - 05 October 2022 -
Finance

Gabonese, and Chadians outperform Cameroonians on the Beac market

Gabonese, and Chadians outperform Cameroonians on the Beac market
  • Comments   -   Thursday, 22 September 2022 16:31

(Business in Cameroon) - The Securities Settlement and Custody Unit (CRCT) of Beac reported that Cameroonian individuals are less dynamic in the Beac public securities market than those in Gabon and Chad, although Cameroon is presented as the economic power of Central Africa.

In detail, the report of operations on the Treasury securities market in August 2022 found that Gabonese came first in the market with CFA33.51 billion in transactions over the period. This equates to 2.54% of the securities held by the country's investors. Despite being a minor player, Chad saw an increase in investors’ interest in government securities. Individuals in this country hold up to 2.3% of the outstanding securities, the equivalent of CFA14.8 billion.

In Cameroon, which provides about 70% of the capital mobilized by CEMAC countries on the primary market of Beac public securities, individuals hold only 1.07% of public securities on the secondary market. This is a total amount of CFA11.86 billion. To reverse this trend, the country’s government is developing a strategy to revive the interest of non-bank investors, including insurance companies, pension funds, and individuals, in government securities with long maturity. This was revealed by the International Monetary Fund in a recent report.

The domination of banks

The institution indicated that the strategy will make it possible to diversify the investor base for public securities and strengthen the government's financing capacity while developing a culture of savings and social protection. It will also contribute to the reduction of the exposure of banks, which still hold the largest share of government securities in the Cemac zone. According to Beac's figures, credit institutions, which operate as primary dealers in government securities, held 78.8% of securities as of August 31, 2022, or a total of CFA3,973 billion.

To abide by the regulatory obligation imposed on them, which is to animate the secondary market by selling at least 30% of the government securities acquired on the primary market each year, these banks prefer to sell Treasury securities among themselves, to the detriment of individuals and other non-bank investors. This practice is reflected by the explosion of transactions made through interbank repo (repurchase agreements, ed). Indeed, the interbank repo is a financing technique within which banks exchange marketable securities for cash, for a specified period. The transaction requires the signing of a master agreement between the parties, which allows the lender to automatically transfer ownership of the securities pledged by the borrower once the repayment date of the debt has passed.

According to Beac's CRCT, financing via this secure mechanism reached a record amount of CFA1,536 billion between January and August 2022. This is almost four times the CFA418.4 billion obtained through repurchase agreements over the whole of 2020, compared with CFA833.7 billion in 2021. However, this boom in repo financing negatively affects the integration of institutional investors and individuals in the secondary market. As a result, due to its lack of dynamism, Beac's secondary market only represented about 0.04% of CEMAC's GDP in 2020, compared to 1.26% in WAEMU, 4.21% in Morocco, and 4.12% in France, according to Beac's "Research Letter".

Written by: Brice R. Mbodiam

Translated from French by Firmine AIZAN

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